Now I wrote about Harbinger the day before he and Soros and Simons were called up on Capital Hill.http://aaronandmoses.blogspot.com/2008/11/santelli-tells-world-about-paulsons.htmlLet's look again at the NY Post article about him on October 5, 2008.While most traders who make their living betting financial sector stocks will decline have been forced to the sidelines in recent weeks because of the Securities and Exchange Commission ban on shorting, one trader who foresaw weakness in Wachovia in the spring has managed to book a $2.5 billion profit on a single trade on the ailing bank, The Post has learned.Philip Falcone, of New York-based Harbinger Capital, rang up the incredible profit by shorting a whopping 117 million Wachovia shares at $30 back in May after his top analyst and investment chief pointed out problems with the Charlotte, N.C.-based bank's mega-billion dollar Option ARM loan portfolio.http://www.nypost.com/seven/10052008/business/falcones_wachovia_short_bet_132254.htmYou even have a nice picture of him!Now the entire short position, as reported by the short interest figures in Wachovia, at the end of April 2008 was only 117.4 million shares.http://247wallst.com/2008/05/12/nyse-short-inve/The short interest only increased 3 million shares the next two weeks when he supposedly put on this position.So where were these shorted shares? Why didn't they show up?After all, he only made $2.5 billion dollars on it. Don't you think he would get a decent locate if you were legitimately making $2.5 billion dollars?Let's check his prime broker and see. Whoops! His prime broker was Lehman Brothers!Now if we can't find his shares, that he shorted, on a $2.5 billion dollar trade in the short interest figures, how are we going to find all these smaller trades?Oh, but rest assured, the gumshoes at the SEC are hard at work. During the week of his testimony, the SEC charged some trading firm, with violating the then-existing "uptick" rule by selling stock to depress prices and then buy back the stock.http://complianceinsights.typepad.com/what_went_wrong/2008/11/sec-charges-day-traders-in-short-selling-scheme.htmlThese traders supposedly made $2.4 million.$2.5 billion, versus $2.4 million. What's $2.476 billion between friends?How long do you think it will take, for all these shorts to get bullish, and to unwind some of their bets? And if Cramer and Buffett were taken to task this week, what will happen to these guys who have profited from the same collapse of the institutions that have hurt Main Street?So we get their metamorphis into the good guys. But first, they need to clean up their books.So now you know why the TALF was postponed a few days. It wasn't that these hedge funds didn't want to buy the Government's merchandise.They just didn't want the Government looking over their books!So now, JPM gets to package the TALF funds, and sell them to the hedge funds, and get the go between fee, so the Fed's don't look at the hedge funds book.And then JPM gets to use it's asymmetrical information advantage with the Fed's blessing!And you still want to believe that these Investment banks won't be able to attract capital at competitive rates without FDIC backing?This week we had Obama, Summers, Pandrit, Dimon and Lewis pumping the economy.Sunday night, Bernanke's coming to 60 Minutes, and he'll be flexing the Fed's muscle to the nation, and giving his version of the pump.And if that doesn't work, the Fed's next step will be to use handcuffs.

Will the Market Reward That Much "Unbending Loyalty"?

The public's commitment to US equities is starting to resemble a country western song. Investors have chosen to "stand by their stocks," come what may in global politics and finance, including:

One of the most politically unstable climates in recent history, as civil protests and military conflict spread across the Middle East and North Africa.

A series of devastating natural and man-made disasters from Japan to New Zealand to Europe.

Multiple sovereign crises that will not go away.

The rapidly receding cash reserves of pension funds.

And the fact that the S&P 500 is trading at the same level today as it did 12 years ago.

But like the lyric says: Been down so long so low, there's only one place left to go -- up. The rally in the major indexes from mid-March has appeared to stoke "worst-is-over" sighs of relief.

Will the market reward this much unbending loyalty? The just-published Elliott Wave Financial Forecast reveals the answer. Both in the US and beyond, our analysis considers:

Germany's economic recovery PLUS the EU bailout of Greece and Ireland: Have these developments diminished the public's fear of sovereign debt default?

Soaring oil costs -- bad for stocks? Our chart shows three full years of what the evidence really says about these two markets.

A sober, fact-based look at the Japanese stock market, before & after the tsunami/earthquake -- read for yourself the quote which forecast "falling stock prices" before the natural disaster.

If bad news is bearish, then why did Japanese ETF's see their largest cash INFLOW in 15 years in the week after the March 11 tsunami/earthquake?

If the whole world -- including 96% of traders -- are bearish the US dollar, can it mean a price reversal at four degrees of trend? Our chart shows the answer.

The return of "Pay-In-Kind" bonds: these toxic instruments allow companies to pay off their debt with more debt (literally). TheFinancial Forecast recalls the outcome of last time PIK bonds were so widely popular.